Debt Nation: Lending Getting Tighter As Canadians Face Threat of Credit Card Trap
Even after a decade of rock-bottom borrowing costs as low as 2%, agencies that help Canadians overwhelmed by debt say their clients are still loading up on some of the most expensive debt in the market by borrowing on their credit cards.
Studies have shown that Canadians used low interest rates to acquire more debt to acquire things that they wanted. That included real estate. As house prices rose, people borrowed against that real estate to buy other stuff such as cars, renovations and holidays. And now that interest rates have begun to rise, existing debt will become an increasing burden.
Contrary to BDO’s advice, Canadians did not use record low interest rates as an opportunity to pay down debt.
“We used the low interest rate environment to acquire more debt to acquire things we wanted,” president Doug Jones said. That included real estate. “But as house prices rose, people borrowed against that real estate to buy other stuff such as cars, renovations and holidays. And now that interest rates have begun to rise, existing debt will become an increasing burden.”
For consumers who are already spending everything they earn, rising rates on other sources of borrowing such as mortgages, cars and lines of credit make the easy availability of credit cards a dangerous temptation.
According to one research analyst, by the time people become so overwhelmed by debt that they reach out for help, they typically owe between 55%-60% of their non-mortgage debt on credit cards.
It’s very easy to fall into the credit card as different life challenges can hit us all. From one losing their jobs to trying to start and help their new businesses thrive; taking on credit card debt is pretty easy.
Getting out of credit card debt is hard, and if it is not taken care of in a timely manner, then a person can be in heavy debt for many years to come.
If you’re looking for a credit counsellor in Toronto, get a quick assessment with us today or call us at 416.900.2324. We will help you develop a plan, reduce your interest costs and get out of debt over time.